Russian Military Budget

Richard Connolly, a specialist on the Russian economy at the Royal United Services Institute for Defence and Security Studies, suggested inn August 2023 that military spending this year will far exceed $100 billion. He said that before the war Russia would typically splash around 3-4% of its annual gross domestic product on defense but now it could be anywhere between 8% and 10%.

By August 2023, Russia had doubled its 2023 defence spending target to more than $100 billion - a third of all public expenditure - a government document reviewed by Reuters showed, as the costs of the war in Ukraine spiral and place growing strain on Moscow's finances. Russia spent 2 trillion roubles ($26 billion) on defence in January and February 2023 alone, a 282% jump on the same period a year ago, data on the budget portal showed, illustrating the spiralling costs for Moscow of its conflict in Ukraine. According to the new data, defence spending amounted to 1.18 trillion roubles in January and 822.4 billion roubles in February. State defence contracts had been a key driver in Russia's economic recovery to GDP growth in 2023, after a 2.1% contraction in 2022.

Russia spent almost 1 trillion roubles on military salaries in the first half of 2023, 543 billion roubles more than in the same period in 2022. Deputy Prime Minister Denis Manturov said in July 2023 that the defence industry was now producing more munitions each month than it did in the whole of 2022. The Stockholm International Peace Research Institute, which tracks military expenditure around the world, estimates that the “national defense” line in Russia’s official budgets accounts only for around three-quarters of total military spending.

“We have no funding restrictions,” Russia’s President Vladimir Putin told a gathering of military top brass in December 2022. “The country, the government will provide whatever the army asks for.” Eighteen months into his war in Ukraine, Putin seemed to be keeping that promise.

Russia's defense spending as a percentage of GDP averaged 2.62% between 2018 and 2022. In 2022, military expenditures may have exceeded 5% of GDP, the maximum since the collapse of the USSR. In 2023, Russia's military spending budget was around 6.6 trillion rubles, which is about $85.8 billion. This represents about 4.4% of the country's forecast gross domestic product. Russia's defense spending has ranged from 13.9% to 23% of its budget between 2011 and 2022.

Defence spending will be cut by 5 percent for 2021, taking it below the level of spending on state-backed industries for the first time since 2014. The Kremlin instead ramped up borrowing to pay for increased social spending ahead of critical parliamentary elections.

Russia had planned to allocate 3.1 trillion rubles [$41.6 billion] for national defense in 2021, 3.2 trillion rubles in 2022, and 3.1 trillion rubles in 2023. This was stated in the 18 September 2020 explanatory note to the draft budget for this period. "The budgetary allocations for the National Defense section in 2021 will amount to 3.113 trillion rubles, in 2022 - 3.231 trillion rubles and in 2023 - 3.257 trillion rubles," the document said. It also notes that the amount of budgetary allocations provided for in the bill compared to the previously approved amounts in 2021 has been reduced by about 119.38 billion rubles, in 2022 - by about 87.39 billion rubles, in 2023 compared to the volumes, stipulated by the bill for 2022, increased by about 25.76 billion rubles. The change in spending in the area of "National Defense" was influenced by an increase in budget allocations for the current maintenance of the Russian Armed Forces (in 2021 by about 5.14 billion rubles, in 2022 by about 8.59 billion rubles and in 2023 by about 35.73 billion rubles), as well as an update of the average annual US dollar exchange rate.

High-precision weapons, robotic complexes, weapons on based on new physical principles and control systems based on artificial intelligence will become the main priorities of the State Armament Program 2024-2033. This was announced by Deputy Prime Minister Yuri Borisov in an interview with Interfax AVN 12 May 2021. According to Borisov, work on planning a new State Armament Programme has already begun. "The main priorities will be areas such as the development of high-precision weapons, including hypersonic weapons, the introduction of robotic complexes, weapons based on new physical principles," said the Deputy Prime Minister. He also specified that "the development of weapons systems will be largely focused on the creation of qualitatively new, including non-traditional weapons, as well as control systems based on artificial intelligence".

The amount of funding for the State Armament Programme 2024-2033 has not yet been established. The amount of financing of the programme can be discussed only after the economic block of the Government of the Russian Federation develops a forecast of macroeconomic indicators of socio-economic development of the country for 2024-2033 - this forecast will serve as the basis for determining the number of federal budget allocations for equipping the Armed Forces of the Russian Federation, other troops and military formations.

The State Arms Program for 2018–2027, approved by the president, provided for the allocation of approximately 20 trillion rubles for defense needs. The amount is astronomical. The bulk of these huge funds will be used to purchase state-of-the-art weapon systems.

Arms procurement costs are de facto reduced. In nominal terms, the cost of the state armament program 2018–2027 approximately corresponds to the volume of the current state program for 2011–2020. But taking into account inflation, the real amount of costs under the new state armament program will be reduced by about half as compared to GPV-2020. When the current GPV was accepted, the dollar was worth about 30 rubles, today - for sixty.

In the West, the assessment of the balance of military power is carried out in dollars based on the prevailing exchange rate. But such a comparative analysis gives a distorted picture, since Moscow buys the products of Russian defense enterprises for rubles. A Purchasing Power Parity calculation yields a Russian military budget of $170,000,000,000, which ranks fifth in the world just behind Saudi Arabia.

Michael Kofman, the analyst of the Center for US Naval Analysis, wrote in Defense News, “The best example of this problem is a recent announcement by the Stockholm International Peace and Research Institute that Russian military spending has fallen to the sixth highest in the world in 2018, at $61.4 billion. Rest assured, or perhaps discomforted: Russian defense spending is several times higher than $61.4 billion, and the Russian defense budget remains the third largest in the world, dwarfing the military expenditures of most European states combined. In reality Russia’s effective military expenditure, based on purchasing power parity (Moscow buys from Russian defense manufacturers in rubles), is more in the range of $150-180 billion per year, with a much higher percentage dedicated to procurement, research and development than Western defense budgets.”

Mikhail Alexandrov , a leading expert at the Center for Military-Political Research at MGIMO, estimates that ", the Russian real military budget - taking into account the expenditures on Rosgvardia, the Border Troops and the FSB (they are considered separately, as well as the US military budget does not include CIA and Coast Guard costs) - turned out to be about 200 billion dollars equivalent."

According to Russian press and Ministry of Finance announcements, from 2017 through 2019 Russian defense spending will be essentially frozen in nominal terms — and therefore declining in real terms. According to Vedomosti on 05 September 2016, the Economic Development Ministry made an unfavorable forecast based on the price of oil and gas. The Russian ministry predicted such results, proceeding from the price of oil at $40 per barrel. But the U.S. Energy Information Administration, Short-Term Energy Outlook, January 2018 forecast Brent crude oil to average $60 per barrel (b) in 2018 and $61/b in 2019.

The new state armament program (GVP) was signed by the president, Deputy Prime Minister Dmitry Rogozin said 26 February 2018. "Yes, the document was signed by the president, originally the GPU was to be adopted in 2016, but due to the events of 2014, connected with the fall in oil prices and currency jumps, the government's financial and economic block could not issue an accurate macroeconomic forecast," he said.

The state armament program is a document of medium-term planning for the technical re-equipment of the army and navy. It takes into account the analysis and assessments of possible threats to Russia's national security. The creation of the LG is coordinated by the Ministry of Defense of the Russian Federation, which attracts other ministries and law enforcement agencies, enterprises of the defense industry complex to develop the document. At the same time, the president's press secretary Dmitry Peskov confirmed the fact of signing a new state program of armaments, he admitted that he had misled media representatives with his previous commentary that Vladimir Putin had not yet signed the document with his signature.

At the end of 2017 it was reported that the main priority of the new LG will be the development of nuclear deterrence systems. Special attention will also be paid to high-precision weapons in the new SPV, in particular, the air and space systems of precision weapons, as well as ground systems. Planned and work on the creation of vertical takeoff aircraft. It is about the creation of aircraft with a short take-off and landing and about aircraft with vertical take-off.

Several factors seem to have converged on military spending levels.

1. The global price of oil fell from over $125 / barrel in 2014 to below $40 / barrel in 2015. Russian state revenue declined accordingly. Oils prices had declined from about $80 / barrel in 1980 to about $25 / barrel in the 1990s, smothering Russian military spending in that decade. With the new century, prices began to rise, and by 2005 had surpassed $60 / barrel. The Economic Development Ministry's unfavorable forecast based on the price of oil at $40 per barrel was pessimistic, as oil has rebounded to $70 / barrel by mid-2018.
2. When the price of oil was high, the Russian military embarked on a full spectrum modernization program that would have transformed Russia into a peer competitor to the United States in the 2025-2030 timeframe. But such an arms buildup bankrupted the Soviet Union, and was unaffordable for the diminished Russian State. As recently as the end of June 2017, the Ministry of Defense announced ambitious plans to build two universal landing craft (UDK) of the type "Priboy" and one aircraft carrier of the project 23000 "Storm" by 2030. But a host of conventional and strategic nuclear forces programs appeared becalmed across the board.
3. With the success of the BREXIT referendum, and the election of Donald Trump, Moscow probably realized that such active measures campaigns were far more effective than a massive arms buildup, at a cost that was a trivial fraction of the arms modernization programs.

Russia's federal budget for 2018 envisioned a reduction in defense spending, but this will not affect the plans to re-equip the army and navy, Putin said 15 August 2017 at a working meeting with United Russia ruling party faction leader Vladimir Vasilyev. "I want to remind you that significant budget savings for the next year are stipulated, by the way, due to a cut in defense spending. This is not connected with the reduction of our plans to refit the army and navy. We will execute the state defense order and will make a new program," Putin said. Putin stressed that every aspect of the country's 2018 budget should be carefully considered in the State Duma during the preparation process.

Under President Putin, the Russian leadership increasingly acted as though an improving military supported its foreign policies and conveyed the image of an active global power capable of asserting it national interests. It also supported the leaders' domestic political position.

In 2002 Dmitry Rogozin, the chairman of the foreign affairs committee a member of a pro-Putin faction in the Duma, stated that Russia had only two reliable allies - the Russian army and the Russian navy. Many others in the Duma called for renewed increases in Russian military spending as the only way to guarantee respect for Russia in international affairs.

The presence of steady opposition among militaries forced the leadership of the Ministry of Defence and civilian authorities to imitate concessions trying to cajole officer corps. The increase of financing defence expenses in 2009 according to pre-crisis plans in 2009 could become the most impressive in the recent Russia’s history – almost by 27%, and the planned amount of total defence expenses in Russia was 4.15 trillion roubles. Dmitri Medvedev declared at the conference with military district commanders that the task of AF reform would be fulfilled at a stated time and all necessary financing would be provided. Thus, the President continued mastering the role of a “powerful” commander-in-chief, which was demonstrated by “militarization of budget”.